Google tax

'Google tax' is a popular term used to refer to anti-avoidance provisions that have been passed in several jurisdictions dealing with profits or royalties that have been diverted to other jurisdictions with lower or nil rates.

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Effective for accounting periods beginning on or after 1 April 2015, the Finance Act 2015[1] imposes a levy on company profits—excluding those of small and medium-sized enterprises—that are routed via "contrived arrangements" to tax havens.[2][3] The arrangements can concern either those that involve entities or transactions lacking economic substance,[4] or efforts by a non-UK company to avoid a UK taxable presence.[5] Companies that determine that they are subject to the tax have a statutory duty to notify Her Majesty's Revenue and Customs of that fact within three months after the end of the accounting period in question.[6]

The UK tax is set at 25% of taxable diverted profits (or 55% with respect to ring fence profits), and will raise about £350m annually by 2017–18, according to UK Treasury estimates.[2]

Amazon announced in May 2015 that it will start paying tax in the UK on British retail sales rather than booking sales through Luxembourg, this will mean the group will not have to pay the diverted profit tax.[9]

The term has similarly been applied to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015[10] introduced in the May 2015 budget, which received Royal assent in December 2015.[11] The provisions came into effect on 1 January 2016 "in connection with a scheme, whether or not the scheme was entered into, or was commenced to be carried out, before that day. "[12]

In the 2016 Australian federal budget, the government announced the introduction of a diverted profits tax (DPT) from 1 July 2017. The Diverted Profits Tax Act 2017 imposes a 40 percent tax on avoidance schemes entered into by significant global entities (SGEs), which are defined as global parent entities with an annual global income of A$1 billion or more.[14]

The term has also been used to refer to a tax in Spain, introduced in 2014, that imposes a royalty charge on Google when its news site, Google News, uses material belonging to a Spanish publisher.[15] Google's response was to cease collating such articles on Google News.[16]